Export prospects: Upward trend halted?

The recovery trend of the Allianz Trade Export Forecast observed since the end of 2022 was halted. In June, the leading indicator for Swiss exports fell to a new low for the year of -1.40 points. The direction has now changed again and the indicator stood at -1.26 points at the beginning of August, 0.47 points lower than three months ago. The Allianz Trade Export Forecast thus remains in negative territory. This indicates below-average growth in a long-term comparison. "Just three months ago, we were pleased to see a dynamic trend reversal in the Allianz Trade Export Forecast," notes Jan Möllmann, CEO Allianz Trade Switzerland. "Unfortunately, this trend was abruptly stopped. On a positive note, we still have robust labor markets and closely coupled consumer confidence and a continued strong appetite to buy."

Recessionary trends in the industry

The trade-weighted purchasing managers' index for the Swiss export markets stands at 46.6 points. This is 1.5 points lower than three months ago. As with the Forecast Index, a trend reversal was also registered here in July. This is not the case for other indicators. For example, according to the Business Climate Index, the production expectations of industrial companies in the European Union are the lowest they have been since June 2020. The Purchasing Managers Index for Swiss industry also shows a sharp decline. It fell to 38.5 points. This is the lowest level since April 2009. Production has generally declined and the falling order backlog suggests that no immediate recovery is in sight.

Financial markets sheer carefree

"What is exciting," says Jasmin Groeschl, Senior Economist for Europe at Allianz Trade, "is that despite rising interest rates and clear signs of a slowdown in industry, many blue chips on the financial markets are trading close to record highs. Investors are probably assuming that the economic dip will pass quickly. At Allianz Trade, we expect more moderate growth of 0.8 % for Switzerland in 2023 and 1.7 % for 2024." The State Secretariat for Economic Affairs (SECO) expects real GDP growth of 1.1 % in 2023 and 1.5 % in 2024.

Inflation dynamics significantly eased

In Switzerland, the inflation rate was above average at 2.8 % in 2022. In the first quarter of 2023, inflation picked up to 3.2 %, but fell to 2.1 % in the second quarter. In July, it stood at 1.6 %. Switzerland protects its farmers by imposing import duties on foreign agricultural products. This stabilizes the prices concerned, but leads to a higher price level. Despite the strong Swiss franc, imported goods are significantly cheaper than in the previous year. However, a strong franc harbors risks for the export economy, as it makes Swiss exports much more expensive in an environment where global demand is weakening significantly due to uncertainties, the turnaround in interest rates by many national banks and continuing high inflation.

Stagnation of Swiss foreign trade after very good first quarter 2023

Driven by rising prices, Swiss foreign trade increased in both exports and imports in the first quarter of 2023. However, these stagnated in the second quarter of 2023. Adjusted for seasonal effects and inflation, exports stood at 2.8 % in the second quarter, having risen by 3.2 % in the first quarter. Imports were down for the third consecutive quarter at -5.4 %. The trade surplus amounted to CHF 9.9 billion in the second quarter. Trends in exports and imports were characterized by a -3.0 % decline in exports in the chemical-pharmaceutical sector. The Watches division, at +2.5 %, recorded a new high. All other product groups showed a decline in sales in the second quarter of 2023. In terms of value, Switzerland sold fewer goods in North America (-4.8 %), Europe (-1.2 %) and Asia (-3.0 %) in the second quarter of 2023.

Imports from North America, Asia and Europe all declined. 10 out of 12 product groups recorded a decline. Again, the chemical-pharmaceutical products sector was particularly affected, falling by 1.3 billion Swiss francs. Aerospace, on the other hand, recorded an increase of 11.5 %, or 32.1 % in real terms.

Source: Allianz Trade Switzerland